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Question

Difficulty: MediumObstacles to Economic Development in Developing Nations

Match each obstacle to economic development in developing nations listed on the left with its corresponding structural manifestation on the right.

  • Primary Commodity DependenceExposure to terms-of-trade deterioration and export earnings instability
  • Technological BackwardnessLow marginal productivity of labor due to outdated production techniques
  • Institutional CorruptionMisallocation of public revenue away from infrastructure and essential services
  • Low Domestic Savings RateInability to internally finance required capital formation without foreign debt

Answer

Primary Commodity Dependence pairs with Exposure to terms-of-trade deterioration; Technological Backwardness pairs with Low marginal productivity of labor; Institutional Corruption pairs with Misallocation of public revenue; Low Domestic Savings Rate pairs with Inability to internally finance required capital formation.
Each obstacle directly produces a distinct macro-structural effect: primary exports cause trade instability, technological lags cause low productivity, corruption leads to resource misallocation, and low savings cause capital accumulation shortages.

Step-by-Step Solution

1
Analyze Primary Commodity Dependence
Developing countries exporting raw materials face fluctuating world market demand and falling export prices relative to manufactured imports.
Establishes the link between primary export concentration and terms-of-trade risks.
2
Analyze Technological Backwardness
Outdated equipment and methods lower the efficiency and output of factor inputs.
Connects state of technology to low marginal factor productivity.
3
Analyze Institutional Corruption
Weak institutions redirect government budget allocations away from public infrastructure.
Connects governance failure to revenue misallocation.
4
Analyze Low Domestic Savings Rate
Insufficient household and government savings constrain national investment funds.
Connects low savings to capital accumulation bottlenecks.

Key Concept

Obstacles to Economic Development in Developing Nations
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Obstacles to Economic Development in Developing Nations